Jul. 9, 2013

Written by

Detroit Free Press Education Writer

The Hazel Park Schools district is in probable financial stress, state Superintendent Mike Flanagan said in an interim report on the district’s finances.

The interim report, sent to district officials Monday, is required under state law. On June 19, Flanagan ordered a preliminary review of the finances of the district, which has been operating with a deficit since 2007. The district has five days to provide comments.

Hazel Park is one of 55 school districts and charter schools in Michigan that are operating with a deficit, the most ever in Michigan. In Hazel Park, the deficit has grown from $191,519 at the end of the 2006-07 school year to a $3.3-million deficit the district projected by June 30.

The interim report says the district has shown unsatisfactory progress in eliminating the deficit. Flanagan pointed out that in 2009 he granted the district an extension of three years — until June 30, 2014 — to eliminate the deficit.

“The district is unable to eliminate the deficit by that extended due date and requested an additional year to June 30, 2015,” Flanagan said.

He granted the request for an extension, but said the need for additional time “indicates a degree of financial stress.”

Despite the extra time needed, the district only meets three of the five factors required to determine financial stress. For instance, Hazel Park’s audits have not found any material internal control weaknesses, and the district hasn’t failed to meet obligations like payroll and pension fund deposits. Most of the districts where a financial emergency has been declared have met all five factors.

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A final report on the preliminary review conducted by the Michigan Department of Education must be sent to the state Local Emergency Financial Assistance Loan Board by July 26. If that board determines there is probable financial stress, it would take the district a step closer to a declaration of a financial emergency.

That declaration could involve drastic action, such as the appointment of an emergency manager or bankruptcy. Other options would include a consent agreement or a neutral evaluation process.

In a June 26 letter posted on the district’s website, Hazel Park Superintendent James Meisinger said the administration is confident that the additional time to eliminate the deficit, along with downsizing and other reductions, will allow the district to emerge in the black.

“It should be remembered that — more than any other factor — it was the sudden drop in enrollment that triggered our current status,” Meisinger said. “Prior to this past year’s enrollment decline our district was well on its path to emerging out of deficit.”